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N.Y. Court Upholds Denial of Air Permit on Climate Change Grounds

June 30, 2022, 8:00 AM

A New York trial court’s ruling to uphold a decision by the New York State Department of Environmental Conservation (DEC) to deny a natural gas-fired power plant a key air permit on climate-change grounds could have serious consequences. Although the decision remains subject to appeal, if affirmed it will grant enormous power to state agencies to deny permits and other approvals under the Climate Leadership and Community Protection Act (CLCPA), the state’s comprehensive climate change statute.

This decision strongly reinforces the need for all businesses in New York to be aware of the statute’s scope and impact.

The CLCPA is a comprehensive statute that requires the nearly complete decarbonization of New York’s economy by 2050. Among its aggressive requirements are a statutory obligation for the state to obtain 100% of its electricity from emissions-free sources by 2040, and a requirement that the DEC establish statewide greenhouse gas (GHG) emissions limits applicable to all sectors of the economy.

CLCPA Section 7(2) also requires administrative agencies to determine whether proposed actions may be inconsistent with, or interfere with, those emissions limits. If they are, Section 7(2) requires the agency to provide a detailed statement of justification for the action notwithstanding the inconsistency and identify applicable alternatives or mitigation measures.

Challenges to DEC Authority

In 2019, the owner of the Danskammer Generating Station in Newburgh, N.Y., filed an application with the DEC for a new Title V air permit, which would authorize the replacement of its existing natural gas-fired equipment with new, more efficient equipment. On Oct. 27, 2021, the DEC rejected Danskammer’s application on the grounds that the replacement project would increase GHG emissions from the facility (due to more frequent dispatch).

By reaching this decision, the DEC effectively asserted that it has the authority to deny a permit application under Section 7(2) if the proposed action would be inconsistent with or interfere with the statewide GHG emissions limits established under the CLCPA.

Danskammer appealed, and the New York State Supreme Court, Orange County (New York’s trial-level court), upheld the DEC’s decision. The key question in the case was whether the DEC acted beyond its authority in actually rejecting the permit, versus just requiring alternatives and/or GHG mitigation measures.

Danskammer argued that Section 7(2) did not expressly authorize the DEC to deny a permit when proposed actions will interfere with CLCPA’s goals, and that by doing so, it usurped the authority of the State Board on Electric Generation Siting and the Environment (which, under the Public Service Law, has the authority to determine whether power plants should be built in the state).

Court Upholds DEC’s Authority

In its decision, the court found that the DEC’s denial of the permit was within the scope of its authority under the CLCPA. While the court acknowledged that Section 7(2) did not expressly authorize regulatory agencies to deny permits, it did not expressly forbid them from doing so, either. It therefore found it necessary to analyze the Legislature’s intent in enacting the law to determine whether agencies have the authority to deny permits under Section 7(2).

The court noted that, in enacting the CLCPA, the Legislature determined that climate change was not a developing or potential problem that might arise in the future, but instead is currently adversely affecting the state’s economic well-being and environment. It is therefore a “currently existing, urgent problem,” allowing the court to draw the “reasonable inference and conclusion” that the statute does in fact authorize the DEC to deny a permit based on its finding that the proposed action will interfere with the CLCPA’s goals of achieving the state’s GHG emissions standards.

While the case is likely to be appealed, if it were to hold up it would grant to the DEC and other state agencies enormous power to reject permits for any project that they find will materially increase GHG emissions. This would include not just air permits, but other permits issued by the DEC and other agencies, including, but not limited to, wastewater permits, water quality certifications issued under the Clean Water Act, and determinations of consistency with the Coastal Zone Management Act.

It will remain to be seen how the DEC will wield this new-found power. The DEC has recently approved expansions of manufacturing facilities that increase the use of fossil-fuels in the state, which seems at odds with the denial of Danskammer’s permit in this case. Businesses of all varieties should closely monitor the DEC’s use of this authority over the next two years until it promulgates binding regulations to implement the act.

Takeaways for Attorneys

In light of this decision, attorneys should do the following:

  • Monitor the outcome of this proceeding, and appeals filed on the Astoria Gas Turbine Power Replacement Project (for which DEC also denied a Title V permit on similar grounds);
  • Monitor the proceedings of the Climate Action Council, which is currently drafting a scoping plan that will serve as a framework for the final CLCPA regulations; and
  • Investigate the requirements of each state agency from which permits or approvals may be governed for any new project. The applications for such approvals will likely require a detailed description of how the project will comply with, or facilitate the goals of, the CLCPA. The strength of that description may determine whether the applicable agency can or will approve the proposed project.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Peter Trimarchi is a New York-based partner in Reed Smith’s global Energy and Natural Resources Group. He is an environmental lawyer with a focus on high-profile energy deals and complex regulatory and enforcement matters. His clients include Fortune 500 companies, private equity companies, and leaders in the natural gas and renewable energy industries.